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For all the talk about Sprint acquiring T-Mobile to challenge wireless industry behemoths Verizon and AT&T, the nation’s third-largest carrier may not be up to the regulatory fight.

According to a report in the Wall Street Journal, Sprint execs are huddling, trying to make a decision whether or not to move forward with a T-Mobile grab. The regrouping comes in the wake of antitrust officials expressing their displeasure at the prospects of the third- and four-largest wireless carriers further consolidating the industry by joining forces.

“Sprint Chairman Masayoshi Son and Chief Executive Dan Hesse, who met with officials at the Justice Department and the Federal Communications Commission in Washington in recent weeks, always knew a deal would be a tough sell, the people said. But the men were surprised by the level of opposition and its very public nature, one of the people said,” the Journal reported.

Not So Bold?

In December, rumors started circulating that Softbank, which recently acquired Sprint, is ready to make another bold move in the U.S. wireless industry and T-Mobile is smack dab in the center of the mix. Sprint was rumored to be considering grabbing the company, which would give the combined firm 98 million subscribers -- just 10 million fewer than AT&T and 3 million fewer than Verizon.

Almost immediately, news reports started circulating that at least six banks were working up proposals to finance a Sprint buyout of T-Mobile. Indeed, the Journal cited “people familiar with the matter” and pointed to the financing talks as another sign that the company is preparing to announce an official offer.

According to the Journal’s sources, the deal could be worth more than $20 billion and Sprint may make the bid in January. The paper reports T-Mobile has a current market valuation of $21.8 billion. If the carriers merge, the combined value of the resulting company would be about $57 million.

Anything Can Happen

We turned to Jeff Kagan, an independent industry analyst who initially suggested that Sprint would face major regulatory hurdles, to get his take on the latest twist. He told us the problem he’s been concerned about all along is manifesting.

“While from Sprint and T-Mobile perspective the deal sounds like it makes sense, from a regulatory perspective I see a lot of pushback,” Kagan said. “Regulators in the U.S. have already said no to the T-Mobile [and] AT&T deal a few years ago. They said that they wanted to see the four competitors in the marketplace competing.”

With Sprint and T-Mobile number three and number four, Kagan said, the threat might not be as great but it's a real threat, nonetheless. While he still thinks that Sprint and T-Mobile will be in the acquisition market going forward, he doesn't see them getting together because the path will be too difficult.

“Of course, anything can happen,” he said, “and conditions can be placed and agreed to, but as things stand right now I don't see T-Mobile and Sprint getting together.